Viet Nam : Supporting Public Financial Management in Viet Nam

Public sector management / Public expenditure and fiscal management

Over the past 2 years, the Government of Viet Nam has approved a number of landmark reforms to its system of PFM. This has included the passage of the Public Investment Law (PIL) in 2014 and more recently the passage of the State Budget Law (SBL) in June 2015. This is the first revision of the SBL since 2002. Recent reforms aim to incorporate generally regarded international good practices to Viet Nam's public financial management system. These include: a) introducing medium-term expenditure and revenue planning; b) increasing the fiscal autonomy of provincial governments (particularly with regards to debt management); c) introducing output-based budgeting practices; d) reducing the extent of off-budget expenditure; e) strengthening the management of public assets; and enhancing budget accountability and transparency. Over time, these measures have the potential to significantly improve the efficiency and effectiveness of public expenditure in Viet Nam.

The Government's drive towards enhancing the country's public financial management system will soon include two key additional pieces of legislation. In 2015, the National Assembly is expected to approve the Law on Accounting, and a new draft Law on Public Asset Management (PAML) will be submitted for consideration in 2016. The latter has important implications for budget formulation (both recurrent and investment components) and important linkages to all of the other elements of the PFM system, with the management of public assets being better integrated with financial management information systems.

In light of these recently passed and forthcoming legislative initiatives, the Government is faced with significant implementation challenges. An important number of decrees and circulars are needed to clarify how the high-level principles of the PIL, SBL and the upcoming PAML will be put to work. Significant capacity development and training is also required at both national and provincial government levels to ensure officials are fully aware of, and able to implement, new requirements. With the SBL (2015) coming into effect on the 1st of January 2017, many of the law's implementing regulations need to be in place by the middle of 2016, when 2017 budget preparations commence. At the same time, several draft implementation decrees need to be prepared in parallel to the finalization of the draft PAML, which is expected to be submitted to the Government in May 2016. This situation provides ADB with an opportunity to deepen its engagement in and support to the Government of Viet Nam's public financial management reform.

1. Assessment of financial management information systems for monitoring debt mobilization of sub-national governments prepared.

2. Background papers for the drafting of Decree on Infrastructure Asset Management prepared.

3. Assessment on information system requirements for public asset management prepared.

4. Manual on Budget Oversight Functions of the National Assembly, following State Budget Law (2015) prepared.

Project's outputs are being completed on schedule, including:

" A Decree on rail and metro asset management has been prepared and submitted to the Government for approval;

" A manual on national budget oversight has been completed and published;

" The National Public Borrowing and Debt Repayment Plan, 2016-2020 has been prepared and submitted to the Government for approval;

" A plan of priority actions to strengthen public debt management has been prepared and submitted to Ministry of Finance for approval;

" A decree on government guarantees for projects has been revised and approved by the Government;

" A revised law on public asset management has been prepared and is being finalized by 31 March 2017 for submission to the National Assembly for approval in May 2017;

" A methodology to calculate risk-based government guarantee fees for projects is being finalized, by 31 March 2017; and

" Reporting templates for provincial public debt sustainability assessments have been completed, and hands-on support for public debt assessment has been provided to 8 provinces participating in ADB projects.